If you own a small business, it is likely there are a few different tax breaks you can take advantage of. This can help you to save a significant chunk of money every year. However research has found that lots of business owners don’t actually use these tax breaks.
These tax breaks can provide businesses with a lot of financial relief, especially in the current economic climate. After all, prices are rising in many areas – and these breaks can really help you to save a significant chunk of money!
Here are five common tax breaks for small businesses.
1. 5 Common Tax Breaks For Small Businesses: Capital Allowance
Lots of daily business expenses can be subtracted from your overall business income when you calculating taxable profits. This includes vehicles, computer equipment (such as laptops and printers) and machinery. This is a great way to reduce your overall expenses, especially if your business uses a lot of equipment. This includes businesses with offices or lorry drivers.
2. Work Parties
Staff parties (or general annual entertainment) are normally allowed to be filed as a deduction for tax reasons. For instance, a staff Christmas party for staff is rarely taxable on the people attending (as long as the cost per head is less than £150). The party must also be open to all company employees; if you have more than one business location, the party must be open to all employees from one location.
If you decide to use this tax break for your next staff party, be aware that all costs (including VAT) must be accounted for. This includes transport costs and accommodation costs, as well as food and drink costs.
3. Employment Allowance
The UK Employment Allowance lets employees reduce their NI liability. This allowance was raised from £3,000 to £4,000 in 2020 (and you can claim less than this if it will cover the full Class 1 NI bill).
However it is important to be aware that this tax break is only eligible for employees who has NIC that are under £100,000 for the last tax year. If you are not sure if you are eligible for this, we suggest speaking to your accountant to find out more.
4. Small Biz Rate Relief
If your business has a physical location, such as an office, a shop, a warehouse or a pub, you may be eligible for rate relief. This tax break comes from the local council, and there are a few rate reliefs available. This includes small business rate relief, charitable rate relief and rural rate relief.
Rate relief was increased in 2020 to 100% for the hospitality, leisure, nursery and retail sectors due to COVID-19. So if your business is eligible, you could save a large sum of money with this tax break!
5. R&D Tax Relief
There is also a Research and Development (also known as R&D) tax relief scheme that allows small businesses to invest in new tech projects. If you invest in an R&D tech project you will be eligible for a generous tax break. In fact, you can claim tax credits of up to 230% on the tech costs!
Projects must help to further technology or science; for instance, they could look for an advance in a specific area of science of technology. You can find out more about eligible businesses by clicking here.